House budget hearing: DESE seeks $47.4M settle-up, $95M cash to cover lottery shortfall

The House Budget Committee heard testimony on a supplemental budget for K‑12 education in which the Department of Elementary and Secondary Education (DESE) and the state budget office asked for $47.4 million to settle FY25 formula obligations and an additional $95 million in general‑revenue authority to cover a shortfall in lottery cash.

The settlement request stems from updated student and enrollment data and recent legislative changes, officials said. "This is all legislation based," State Budget Director Dan Hogg told the committee, noting the request ties to changes made by Senate Bill 727 and House Bill 447 that affect the formula’s parameters.

Why it matters: Missouri’s foundation formula is funded from multiple sources, including a portion of lottery proceeds that are constitutionally dedicated to education. When lottery revenues fall short of the amount budgeted, the state must decide whether to backfill with general revenue to ensure school payments continue on schedule.

What the department described: Hogg and DESE Deputy Commissioner Carrie Montes said the $47.4 million supplemental is a tally-up based on more recent data than was available when the FY25 budget was prepared. DESE’s breakdown presented in committee showed roughly: - about $1.5 million for virtual students; - about $31 million for expanded pre‑K funding tied to SB 727; - about $14 million for local effort calculations; - roughly $6 million for non‑resident pupil adjustments.

Hogg said the $95 million request for general revenue is a cash replacement because the state’s lottery revenues are currently expected to be insufficient to supply the cash behind existing lottery appropriations. "You can have appropriation authority, but you may not have enough cash in the bank account to actually send it out the door," Hogg told the committee.

Lawmakers pressed officials on causes and safeguards. Representative Riggs asked whether the falloff in lottery transfers was tied to changes in player behavior; Hogg and other witnesses said they do not have definitive behavioral data tying the decline to any specific cause, although large jackpot cycles can materially affect receipts. Representative Prouty and others emphasized that the formula has historically used a mix of general revenue and lottery proceeds rather than relying solely on lottery cash.

Other education items discussed at the same hearing included increases in small‑school grants (SB 727 doubled the small‑school appropriation, Hogg said), and a separate supplemental request for state assessments and invoices that DESE said were late to process. DESE staff told the committee some assessment-related invoices were late due to contract rebids and timing issues, and that a portion of that supplemental request restores authority for contract and testing costs that were not fully captured in last year’s appropriation.

What’s next: Committee members asked for more recent month‑by‑month cash projections, and budget staff agreed to provide agency by agency year‑to‑date expenditure and cash forecasts. Hogg told lawmakers the figures in the supplemental are based on the best available data at the time and that numbers could be adjusted as newer monthly receipts and collections become available.

Lesser details: The supplemental request as presented is largely legislatively driven, Hogg said; some line items reflect court or statutory obligations (for example, changes tied to MSIP 6 performance expectations were referenced as a driver of earlier formula increases). The committee flagged the $95 million GR request for follow‑up questions about whether lottery authority will always be spent first if receipts recover.

Ending note: Committee members and budget staff agreed to supply updated cash‑flow and year‑to‑date expenditure reports to help lawmakers evaluate whether the requested cash transfers can be reduced if lottery revenue improves before year end.